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The Community Reinvestment Act’s Harmful Legacy (PDF)
...While both CRA- and non-CRA lenders have increased the
number of loans to low-income borrowers, the financial soundness of CRAcovered
institutions decreases the better they conform to the CRA. Gunther
compares certain institutions’ CRA ratings to their CAMELS rating—a formula
used by bank regulators to assign safety and soundness ratings that takes into
account capital adequacy, asset quality, management, earnings, liquidity, and
sensitivity to market risks. He found that the better a lender was rated by CRA
standards, the worse was its CAMELS rating....

...The negative effect of CRA on small banks compounds in light of the observation by
George Benston of Emory University that larger banks often operate in LMI as a strategic loss, in order to get a satisfactory CRA rating for regulatory approval for mergers and acquisitions....